Dollar encounters resistance just below ¥100

SaumyaVaishampayan

V.Phani Kumar

NEW YORK (MarketWatch) — The U.S. dollar came tantalizingly close to the 100 Japanese yen level on Thursday, reaching as high as ¥99.94 before edging down.

The dollar
USDJPY, +0.10%
exchanged hands at ¥99.73 after rising to ¥99.94, again running into resistance as it approached ¥100, a level around which it has hovered but has been unable to breach for four days. The dollar was ¥99.77 in late North American trade Wednesday.

“If we hit that 100 level you could see some profit-taking, said Eric Viloria, a senior currency strategist at Forex.com.

But the yen could be headed for a correction in the short term, he said.

“As we get higher in dollar-yen, the move for now looks like it might be getting overextended,” said Viloria. The longer-term trend in the Japanese yen is still weakness, he said.

The dollar was trading at ¥93.03 at the close of North American trade on April 3, according to FactSet, just before the Bank of Japan announced its aggressive monetary easing plan that will attempt to rid the country of deflation. Since then, it has leapt almost 7% as the yen has tumbled.

The pace of the yen’s decline is a concern and could result in outright yen purchases by the BOJ if it continues, said Michael Woolfolk, global markets strategist at BNY Mellon Global Markets.

“If we breach ¥100 in the near term and stay above ¥100, I would expect that there would be an increasing likelihood of BOJ intervention supported by the international community,” said Woolfolk.

The Nikkei Stock Average
NIK, -0.99%
rose 2% on Thursday to its highest level since July 2008. That rise, coupled with stock gains in Europe, is important as the yen continues to respond to investors’ appetite for riskier assets, Woolfolk said.

Goldman Sachs said Thursday it has revised its 3-,6- and 12-month forecasts for dollar/yen to ¥102, ¥105 and ¥105, respectively. It is also projecting the dollar will trade at ¥110 at the end of 2014.

The Australian currency attracted attention in Asian trade as the country’s unemployment rate rose to its highest level in more than three years, pushing the Australian dollar to $1.0519 in the late afternoon in Asia.

Reuters

A man walks past an advertisement depicting an altered Australian five dollar note

But the Aussie
AUDUSD, -0.1166%
recouped those losses in North American trade, edging higher to $1.0546 in recent trade, compared with $1.0544 in North American trade Wednesday.

The earlier drop in the currency, often considered a measure of investor appetite for risk, came after Australia’s jobless rate jumped to 5.6% in March, disappointing analysts who had expected it to remain unchanged at the February level of 5.4%. The total number of jobs in the economy fell by 36,100, three times the expected figure. Read more on the jobs data.

“Looking through the monthly volatility in the jobs data the pattern appears to be that there is relatively soft overall jobs growth, which is insufficient to cover labor force growth,” Commonwealth Bank economists led by Michael Workman wrote in a note to clients.

They added, however, that the data was in line with the Reserve Bank of Australia’s expectation for the labor market to weaken, and that they expected the central bank to keep the interest rates on hold over the rest of 2013.

The ICE dollar index
DXY, -0.05%
a wider measure of the dollar against a basket of six major currencies, eased to 82.255 from 82.508.

In the U.S., weekly jobless claims dropped more than expected to 346,000 for the week ended April 30, putting claims back on par with levels seen for most of the year. The claims led to broad weakness in the greenback, considered a safe-haven asset, as risk appetite improved on Thursday, said Viloria of Forex.com.

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